Small Firms Weigh Big 5-0 Under Obamacare

Pamela O'Hara lives and breathes small business. Her company Batchbook provides customer relationship software for small firms like yoga studios and florist shops. In six years, her firm has gone from tiny startup to a growing staff of 30.

"I think we've done that because we've had such a commitment to our employees. And a big part of that is the benefits," said O'Hara in Batchbook's Providence, R.I. offices, where they recently added five new team members.

Batchbook has been offering health benefits from day one, even when the firm had no profits. "It was a big decision, but it was really important for us, that we build the company that we wanted," O'Hara said.

Now, she and her HR manager are spending a lot of time trying to figure out how the Affordable Care Act, also known as Obamacare, will impact the firm's benefit plan. This year, they chose a high deductible plan to keeps costs down. Their insurance broker said that plan may not comply with new limits on out-of-pockets costs for health plans beginning in 2014, so their rates are likely to rise. That could impact hiring plans.

"My policy is you don't hire somebody unless you can afford them," O'Hara explained. "The question is what we can afford to pay someone, when you don't have a really good understanding of what that benefits package is going to cost."

Many of the new mandated coverage details are still being finalized in Washington, including the so-called employer mandate. Under proposed rules, starting in 2014 companies with 50 or more full-time employees will be required to provide workers with qualified benefit plans, or face steep fines. For companies with fewer than 50 full-time employees, there's no mandate or penalty.

"I don't know that we'll necessarily slow down the hiring that we're doing because we're growing very quickly and we'll need to hire," O'Hara said.

But business groups like the National Federation of Independent Business, NFIB, believe the Obamacare insurance rules will have a negative impact on small business hiring.

A 2011 NFIB study found that the health increased health costs due to the new insurance premium tax that begins in 2014 could reduce future private sector employment by 125,000 jobs during the next 19 years, with well over half of those jobs at small businesses.

On top of the new taxes, Kevin Kuhlman, an NFIB manager of legislative affairs, said the employer mandate will drastically impact growth plans for small firms that don't already offer insurance.

"There are no good options for these businesses that are at or near that 50 employee threshold," Kuhlman explained. "They either have to reduce hours, prevent growth and expansion, or move to a more temporary workforce. None of these choices are good."

For very small firms, with 25 or fewer full-time employees, Obamacare health insurance tax credits offer some relief, but only for those that pay workers less than $50,000 a year. Higher-wage firms like Batchbook are on their own.

"It's tough to be considered a high-wage employer and not have that be rewarded." Pamela O'Hara said. She still feels strongly offering health care is the right thing to do, but she's very much on the fence about Obamacare.

"I'm not opposed to this plan, because it may mean more decisions and higher rates for us — but I can't approve it yet."